Adkisson's

Uniform Protected Series Act

(UPSA)

Caution State Law Variances!

SECTION 608. APPLICATION OF SECTION 404 AFTER MERGER.

(a) A creditor's right that existed under Section 404 immediately before a merger under Section 604 may be enforced after the merger in accordance with the following rules:

(1) A creditor's right that existed immediately before the merger against the surviving company, a continuing protected series, or a relocated protected series continues without change after the merger.

 

JayNote: Under § 608(a)(1), if a creditor had a right against either a continuing protected series or a relocated protected series prior to the merger, that right doesn't change after the merger.

 

(2) A creditor's right that existed immediately before the merger against a non-surviving company:

(A) may be asserted against an asset of the non-surviving company which vested in the surviving company as a result of the merger; and

(B) does not otherwise change.

 

JayNote: What if, prior to the merger, a creditor had a right against the LLC that was terminated as part of the merger? In that event, the creditor can satisfy its right against whatever property of that LLC which passed to the surviving company under § 608(a)(2).

 

(3) Subject to subsection (b), the following rules apply:

 

JayNote: Paragraph (a)(3) of § 608 is confusing in the extreme even to somebody who thinks they might otherwise sort of understand this stuff.

 

(A) In addition to the remedy stated in paragraph (1), a creditor with a right under Section 404 which existed immediately before the merger against a non-surviving company or a relocated protected series may assert the right against:

(i) an asset of the surviving company, other than an asset of the non-surviving company which vested in the surviving company as a result of the merger;

(ii) an asset of a continuing protected series; or

(iii) an asset of a protected series established by the surviving company as a result of the merger;

(iv) if the creditor's right was against an asset of the non-surviving company, an asset of a relocated series; or

(v) if the creditor's right was against an asset of a relocated protected series, an asset of another relocated protected series.

 

JayNote: Section 608(a)(3)(A) relates to a creditor who, prior to the merger, had a right against an unassociated asset (per § 404) of either the non-surviving company or a relocated protected series of that non-surviving company. In that case, with some limitations, the creditor can enforce the right against an asset of the surviving company or any of its continuing or relocated protected series. Note that this only relates to unassociated assets; if a creditor had a right against an associated asset, then that right would follow the asset to whatever protected series made it through the merger under § 608(a)(1).

 

(B) In addition to the remedy stated in paragraph (2), a creditor with a right that existed immediately before the merger against the surviving company or a continuing protected series may assert the right against:

(i) an asset of a relocated protected series; or

(ii) an asset of a non-surviving company which vested in the surviving company as a result of the merger.

 

JayNote: Section 608(a)(3)(B) relates to a creditor who, prior to the merger, had a right against the surviving company or one of its protected series that survived the merger. In that case, the creditor can enforce the right against either an asset of a relocated protected series or an asset of the surviving company which had vested in that company from the non-surviving company. Unlike (3)(A), (3)(B) is not restricted to unassociated assets.

 

(b) For the purposes of subsection (a)(3) and Section 404(b)(1)(A), (2)(A), and (3)(A), the incurrence date is deemed be the date on which the merger becomes effective.

 

JayNote: The testing date for the creditor's rights is the date of the merger, per § 608(b).

 

(c) A merger under Section 604 does not affect the manner in which Section 404 applies to a liability incurred after the merger.

 

JayNote: Per § 608)(c), a creditor's rights against an unassociated asset (under § 404) is not affected by the merger so long as the liability to the creditor was incurred after the merger, i.e., the merger doesn't affect post-merger liabilities.

 

 

Reporter's Comment to Section 608

 

As explained in the comment to Section 404, ordinarily the transfer of an asset ends any preexisting Section 404 exposure applicable to the asset. As a result, it is necessary to protect against a merger under Section 604 being used solely or essentially to extinguish preexisting Section 404 exposure. Section 608 inhibits such misuse in three ways.

 

First, the section preserves preexisting exposure to the extent practicable: As to:

 

  • any asset owned by the surviving limited liability company or a continuing or relocated protected series, Section 604(a)(1) expressly preserves preexisting Section 404 exposure; and

 

  • any asset owned by a non-surviving series limited liability company and vested in the surviving company as a result of the merger, Section 608(a)(2) causes any preexisting exposure to "run with" the asset and apply to the asset as if the vesting had not occurred – i.e., if the non-surviving company owned the asset at the incurrence date, for the purposes of Section 404(b)(2) the surviving company is treated as if it owned the asset on that date.

 

Second, with one major caveat, under Section 608(a)(3)(A) a creditor with a preexisting Section 404 claim against a non-surviving limited liability company or a relocated protected series may assert the claim against any asset owned by the surviving limited liability company or any protected series of the surviving company.

 

Third, with the same major caveat, under Section 608(a)(3)(B), a creditor with a preexisting Section 404 claim against an asset of the surviving limited liability company or a continuing protected series of the company may assert the claim against an asset of a relocated protected series or an asset of the non-surviving company that vested as a result of the merger in the surviving limited liability company.

 

The major caveat: For purposes of Section 608(a)(3)(A) and (B), the incurrence date is deemed to be the effective date of the merger. In consequence, due diligence for a surviving limited liability company in a merger under Section 604 includes checking the adequacy of Section 301 recordkeeping for any asset that after the merger will be owned by the surviving company or any relocated or continuing protected series of the company as well as by any protected series created in the merger.

 

For the definition of "incurrence date", see Section 404(a)(2).

 

UPSA AND WEBSITE CONTENTS

 

ARTICLE 1. GENERAL PROVISIONS

SECTION 101. SHORT TITLE.     SECTION 102. DEFINITIONS.     SECTION 103. NATURE OF PROTECTED SERIES.    SECTION 104. POWERS AND DURATION OF PROTECTED SERIES.     SECTION 105. GOVERNING LAW.     SECTION 106. RELATION OF OPERATING AGREEMENT, THIS ACT, AND LIMITED LIABILITY COMPANY ACT.     SECTION 107. ADDITIONAL LIMITATIONS ON OPERATING AGREEMENT.     SECTION 108. RULES FOR APPLYING LIMITED LIABILITY COMPANY ACT TO SPECIFIED PROVISIONS OF ACT.

 

ARTICLE 2. ESTABLISHING PROTECTED SERIES

SECTION 201. PROTECTED SERIES DESIGNATION; AMENDMENT.     SECTION 202. NAME.     SECTION 203. REGISTERED AGENT.     SECTION 204. SERVICE OF PROCESS, NOTICE, DEMAND, OR OTHER RECORD.     SECTION 205. CERTIFICATE OF GOOD STANDING FOR PROTECTED SERIES.     SECTION 206. INFORMATION REQUIRED IN ANNUAL BIENNIAL REPORT; EFFECT OF FAILURE TO PROVIDE.

 

ARTICLE 3. ASSOCIATED ASSET; ASSOCIATED MEMBER; PROTECTED-SERIES TRANSFERABLE INTEREST; MANAGEMENT; RIGHT OF INFORMATION

SECTION 301. ASSOCIATED ASSET.     SECTION 302. ASSOCIATED MEMBER.     SECTION 303. PROTECTED-SERIES TRANSFERABLE INTEREST.     SECTION 304. MANAGEMENT.     SECTION 305. RIGHT OF PERSON NOT ASSOCIATED MEMBER OF PROTECTED SERIES TO INFORMATION CONCERNING PROTECTED SERIES.

 

ARTICLE 4. LIMITATION ON LIABILITY AND ENFORCEMENT OF CLAIMS

SECTION 401. LIMITATIONS ON LIABILITY.     SECTION 402. CLAIM SEEKING TO DISREGARD LIMITATION OF LIABILITY.     SECTION 403. REMEDIES OF JUDGMENT CREDITOR OF ASSOCIATED MEMBER OR PROTECTED-SERIES TRANSFEREE.     SECTION 404. ENFORCEMENT AGAINST NON-ASSOCIATED ASSET.

 

ARTICLE 5. DISSOLUTION AND WINDING UP OF PROTECTED SERIES

SECTION 501. EVENTS CAUSING DISSOLUTION OF PROTECTED SERIES.     SECTION 502. WINDING UP DISSOLVED PROTECTED SERIES.     SECTION 503. EFFECT OF REINSTATEMENT OF SERIES LIMITED LIABILITY COMPANY OR REVOCATION OF VOLUNTARY DISSOLUTION.

 

ARTICLE 6. ENTITY TRANSACTIONS RESTRICTED

SECTION 601. DEFINITIONS.     SECTION 602. PROTECTED SERIES MAY NOT BE PARTY TO ENTITY TRANSACTION.     SECTION 603. RESTRICTION ON ENTITY TRANSACTION INVOLVING PROTECTED SERIES.     SECTION 604. MERGER AUTHORIZED; PARTIES RESTRICTED.     SECTION 605. PLAN OF MERGER.     SECTION 606. STATEMENT OF MERGER.     SECTION 607. EFFECT OF MERGER.     SECTION 608. APPLICATION OF SECTION 404 AFTER MERGER.

 

ARTICLE 7. FOREIGN PROTECTED SERIES

SECTION 701. GOVERNING LAW.     SECTION 702. NO ATTRIBUTION OF ACTIVITIES CONSTITUTING DOING BUSINESS OR FOR ESTABLISHING JURISDICTION.     SECTION 703. REGISTRATION OF FOREIGN PROTECTED SERIES.     SECTION 704. DISCLOSURE REQUIRED WHEN FOREIGN SERIES LIMITED LIABILITY COMPANY OR FOREIGN PROTECTED SERIES PARTY TO PROCEEDING.

 

ARTICLE 8. MISCELLANEOUS PROVISIONS

SECTION 801. UNIFORMITY OF APPLICATION AND CONSTRUCTION.     SECTION 802. RELATION TO ELECTRONIC SIGNATURES IN GLOBAL AND NATIONAL COMMERCE ACT.     SECTION 803. TRANSITIONAL PROVISIONS.     SECTION 804. SAVINGS CLAUSE.     SECTION 805. SEVERABILITY CLAUSE.     SECTION 806. REPEALS; CONFORMING AMENDMENTS.     SECTION 807. EFFECTIVE DATE.

 

- - - - -

 

Protected Series Agreements and Forms -- A list of the "best practices" agreements and records that all protected series structures should have.

 

SERIES LLC COURT OPINIONS

 

UPSA COURT OPINIONS

 

None

 

- - - - -

 

NON-UPSA COURT OPINIONS

 

191212 ... Ohio ... Delaware Act .. MSP Recovery Claims, Series LLC v. Phoenix Ins. Co., 2019 WL 6770981 (N.D. Ohio, 2019).

 

181019 ... Florida ... Delaware Act ... MRS Recovery Claims, Series LLC v. USAA General Indemnity Co., 2018 WL 5112998 (S.D.Fla., Oct. 19, 2018).

 

180605 ... North Dakota ... Nevada Act ... Flaten v. Couture, 912 N.W.2d 330, 2018 ND 136 (2018).

 

Updated List

 

SERIES LLC ARTICLES BY JAY ADKISSON

 

2019.01.28 ... Understanding The Protected Series Act: Article 8 And Final Thoughts

2018.11.24 ... Understanding The Protected Series Act: Treating Out-Of-State Series

2018.11.18 ... Understanding The Protected Series Act: Mergers

2018.10.29 ... Understanding The Protected Series Act: Dissolution And Winding Up Of Protected Series

2018.10.21 ... Understanding The Protected Series Act: Liability Limitations And Claims

2018.08.30 ... Understanding The Protected Series Act: Assets, Members And Management

2018.08.28 ... Understanding The Protected Series Act: Creating A Protected Series And Service Of Process

2018.07.18 ... Understanding The Protected Series Act: The Framework of UPSA - Part 2 of a Series

2018.06.18 ... Understanding The Protected Series Act: What Is A Protected Series?

 

 

More articles on Series LLCs by Jay Adkisson click here

THE CHARGING ORDER PRACTICE GUIDE BY JAY ADKISSON

 

The Charging Order Practice Guide: Understanding Judgment Creditor Rights Against LLC Members, by Jay D. Adkisson (2018), published by the LLCs, Partnerships and Unincorporated Entities Committee of the Business Law Section of the American Bar Association

Click here for more information

 

Now available for purchase at https://goo.gl/faZzY6

MORE INFORMATIONAL WEBSITES BY JAY ADKISSON

 

  • Jay Adkisson - More about Jay D. Adkisson, background, books, articles, speaking appearances.

 

  • Captive Insurance - Licensed insurance companies formed by the parent organization to handle the insurance and risk management needs of the business, by the author of the book Adkisson's Captive Insurance Companies.

 

  • Asset Protection - The all-time best-selling book on asset protection planning by Jay Adkisson and Chris Riser.

 

  • Collecting On A Judgment - An explanation of common creditor remedies, strategies and tactics to enforce a judgment, including a discussion of common debtor asset protection strategies.

 

  • Voidable Transactions - Discussion of the Uniform Voidable Transactions Act (a/k/a 2014 Revision of the Uniform Fraudulent Transfers Act) and fraudulent transfer law in general.

 

  • Private Retirement Plans - An exploration of a unique creditor exemption allowed under California law which can be very beneficial but is often misused.

 

  • Charging Orders - The confusing remedy against a debtor's interest in an LLC or partnership is explained in reference to the Uniform Partnership Act, the Uniform Limited Partnership Act, and the Uniform Limited Liability Company Act.

 

  • California Enforcement of Judgments Law - Considers the topic of judgment enforcement in California, including the California Enforcement of Judgments Law and other laws related to California creditor-debtor issues.

 

  • Anti-SLAPP Laws - A collection of and commentary about Anti-SLAPP laws and significant court decisions on the subject within the United States, and special treatment of the California Anti-SLAPP Act.

 

CONTACT JAY ADKISSON

 

Contact Jay Adkisson:

 

Phone: 702-953-9617     Fax: 877-698-0678     jay [at] jayad.com

 

Unless a dire emergency, please send me an e-mail first in lieu of calling to set up a telephone appointment for a date an time certain.

 

Las Vegas Office: 6671 S. Las Vegas Blvd., Suite 210, Las Vegas, NV 89119, Ph: 702-953-9617, Fax: 877-698-0678. By appointment only.

 

Newport Beach Office: 100 Bayview Circle, Suite 210, Newport Beach, California 92660. Ph: 949-200-7773, Fax: 877-698-0678. By appointment only.

 

Social Media: Twitter and LinkedIn

 

© 2019 by Jay D. Adkisson. All rights reserved. No part of this website may be copied in whole or in any part without the express written permission of Jay D. Adkisson. Nothing herein is any advertisement or offer by the firm to practice in any jurisdiction where no attorney of the firm is licensed to practice law. This website does not give any legal advice or opinion, and is no substitute for the advice and counsel of an attorney consulted in the relevant jurisdiction. Other. Questions about this website should be directed to jay [at] jayad.com, by phone to 702-953-9617 or by fax to 877-698-0678. This website is http://www.protectedseriesact.com